Interserve Regulatory News (IRV)

News Release

12 August 2015

Half-Year Results for the six months to 30 June 2015

Continued growth and strategic momentum

Interserve, the international support services and construction group, announces its half-year results for the six months ended 30 June 2015.

Financials

Highlights

· Revenue growth of 16 per cent

· Headline total operating profit up 12 per cent

· Headline earnings per share increased 10 per cent to 30.3p

· Future Workload up 11 per cent to £8.3 billion (HY 2014: £7.5 billion)

· £2.0 billion of new business won in the period

· Key contract wins with both new and existing clients including London Underground, MTR Crossrail, KeolisAmey Docklands, B&Q, BS Stanford, BP Khazzan (Oman), RasGas (Qatar) and the Dubai Aviation City Corporation (UAE).

· Dividend payment increased by 5 per cent to 7.9p

Chief Executive Adrian Ringrose commented:

"We have made good progress in the first half of the year in markets that offer both opportunities and challenges. We have delivered volume growth across the board, and strong profit performances in our Support Services, Equipment Services and International Construction businesses.

Market conditions in UK Construction have remained challenging although demand continues to strengthen and the expanded future workload is encouraging.

Our focus on providing high quality services for both new and existing clients resulted in strong work winning during the period, with our future workload rising 11 per cent over the 12 months to June to stand at a record £8.3 billion.

We expect the premium to the National Minimum Wage announced in the recent Budget to have an initial adverse impact on margins in the UK Support Services segment of £10-15 million in 2016, receding over the next few years thereafter as the change is priced in to relevant contracts.

However, demand in our main markets continues to strengthen, our financial position remains strong which, together with our growing future workload, underpins the Board's confidence in our positive outlook and the increase in the interim dividend to 7.9 pence."

- Ends -

For further information please contact:

Rhys Jones, Group PR Manager +44 (0) 118 9602285

Robin O'Kelly, Group Director of Communications +44 (0) 7786 702526

Richard Campbell/Michael Kinirons +44 (0) 203 219 8816

About Interserve

Interserve is one of the world's foremost support services and construction companies. Our vision is to redefine the future for people and places. Everything we do is shaped by our core values. We are a successful, growing, international business: a leader in innovative and sustainable outcomes for our clients and a great place to work for our people. We offer advice, design, construction, equipment, facilities management and frontline public services. We are headquartered in the UK and listed in the FTSE 250 index. We have gross revenues of £3.3 billion and a workforce of over 80,000 people worldwide.

www.interserve.com

For news follow @interservenews

\* This news release and the Interim Management Report include a number of non-statutory measures to reflect the impact of non-trading and non-recurring items. See note 12 to the condensed consolidated financial statements for a reconciliation of these measures to their statutory equivalents and note 7 for calculation of earnings per share.

Interim management report

Chairman's Statement

STRATEGIC DEVELOPMENT

Interserve continued to perform well in the first half of 2015, delivering further revenue growth in each part of our business and progressing our strategy of building strong core businesses, capturing related expansion opportunities and growing internationally.

While the shape of the business has evolved over the past year, with a stronger presence in support services derived from strategic growth in both facilities management and front-line services, our construction and equipment services businesses also continue to grow. Significant developments in the period included: the commencement of delivery of probation services as part of the Ministry of Justice's Transforming Rehabilitation programme; the integration of esg (acquired in December 2014 to expand our capabilities in the welfare and skills sectors); and the expansion of our frontline and FM services in Saudi Arabia.

We continue to invest in the business, boosting our operational capacity and scaling our back office functions in support of our future growth aspirations.

While the first half results for the Group are good, margin performance in UK construction was below our medium term expectations due principally to the impact of supply chain volatility and inflation, together with the pressures on contract close-outs in the current challenging contracting environment. We won further work in the Energy from Waste, health and education sectors and were appointed as preferred bidder to build a new complex at the Defence and National Rehabilitation Centre at Stanford Hall. With a growing order book we are determined to maintain our historic disciplines and sustain prudent margins through the current demand cycle.

Our Middle East operations continued to gain momentum, driven largely by infrastructure investment and through the extensions to our offering in which we have invested in recent times. Revenues and contribution to operating profit grew, most notably in Equipment Services, driven by major projects in national development plans such as Qatar's 'Vision 2030' and in anticipation of Expo 2020 in the UAE. International Support Services grew strongly through our focus on operational oil and gas services and further development in our facilities management activities. International Construction also made good progress, in particular through our role in two notable retail developments in Dubai and Doha.

With respect to our other international operations in Equipment Services, the Far East and much of Asia-Pacific remained buoyant, off-setting more muted performances in the Americas and Australia.

SUSTAINABILITY

As we continue to grow, we remain mindful of the imperative to promote our culture and values throughout the business. The health and safety of our employees is of paramount importance and we pursue ambitious continuous improvement targets. We have made good progress in the first half, substantially reducing the rate of lost-time incidents. Our sustained progress was recognised by the Royal Society for the Prevention of Accidents awarding us their Order of Distinction and President's Award. Our commitments to developing our people and enhancing the skill-base in our sector were reflected in further investments in training (including both additional on-line functionality and a new training school in Dubai), together with growing the volume of work experiences, apprenticeships and graduate opportunities we offer.

Sustainability with regard to social, natural, human and financial capital is integral to our strategy and our day-to-day operations. In May we published our second annual sustainability report, showing good progress against our 2020 vision (http://sustainabilities.interserve.com).

BOARD CHANGES

Following Les Cullen's retirement at the AGM after serving for over nine years, Russell King has assumed the role of Senior Independent Director (SID), in which capacity he is leading the Board's plans in respect of my own succession as previously announced.

PROSPECTS

The Board remains confident in the Group's market positioning and encouraged by the broad range of work-winning opportunities to deliver further growth for the remainder of this year. The inflationary pressure created by rising demand will continue to require careful management, as will ongoing contracting risk in an environment in which some clients are grappling with their own budgetary challenges. The unexpected premium to the UK National Minimum Wage announced in the recent Budget, while being absorbed over time through mitigating actions and contract pricing, will present a new headwind from 2016. Despite this temporary setback, our prospects remain encouraging in the medium term with each of our main markets set to experience continued demand growth in the coming years.

DIVIDEND

Reflecting our performance and prospects, the Board has approved a further increase in the dividend of 5 per cent to 7.9 pence per share (half year 2014: 7.5 pence per share) which will be paid on 23 October 2015 to shareholders on the register at the close of business on 18 September 2015.

Lord Blackwell

Chairman

12 August 2015

BUSINESS REVIEW

The Group continued to perform well in the first half of the year with revenue and headline operating profit growth of 16 per cent and 12 per cent respectively. We won new work in the period with an aggregate whole-life value of £2.0 billion, increasing our Future Workload at 30 June by 11 per cent over the corresponding date in 2014. Headline Earnings per Share grew by 10 per cent.

DIVISIONAL REVIEW

We segment our results into three main areas of service - Support Services, Construction and Equipment Services - each of which is supported by central Group Services.

SUPPORT SERVICES

Support Services focuses on the management and delivery of outsourced operational activities including facilities management, a broad range of process- and accommodation-related services and services direct to the citizen. Our client base is comprised of both public and private-sector organisations in the UK and overseas. Operations in mainland Europe, which are managed from the UK, are disclosed under Support Services UK.

*Blended underlying margins of associates & subsidiaries

Support Services UK

Support Services UK performed well, achieving revenue growth of 15 per cent, increasing future workload by 7 per cent and delivering incremental growth in the operating margin to 4.3 per cent compared with the first half of 2014.

During the period we developed further our portfolio of private sector clients, for instance in the transport sector where we won a number of long-term contracts in the rail sector with MTR Crossrail and KeolisAmey Docklands in addition to a two-year contract extension to our existing contract with London Underground. In aggregate, these contracts added circa £100 million to our future workload.

We made good progress in the retail sector as well. We secured a three-year, £35 million extension with B&Q, doubling the scale of the cleaning service and adding catering at around a quarter of the estate. We extended our relationship with Debenhams, in which we have delivered facilities services across its UK stores and offices for over 25 years, and mobilised our contract with Sony Europe to manage the company's estate in 27 countries.

Our public sector business has evolved significantly in the past 12-18 months. With respect to facilities management, the main changes relate to reductions in revenue from the loss in 2014 of the South East Regional Prime contract and the decrease in size of the new MoD National Training Estate contract compared to the previous arrangements.

In recent years we have, though, built capability in the provision of frontline public services across healthcare, welfare-to-work, skills and justice. This growing part of the business includes Interserve Healthcare, Interserve Learning & Employment (ILE), which was expanded following last year's acquisition of the Employment and Skills Group (esg) and Purple Futures, which provides probation, rehabilitation and 'through-the-gate' services on behalf of the Ministry of Justice (MoJ).

Our frontline services businesses now employ some 5,000 staff and generate annual revenues of over £200 million. While these businesses currently operate in largely discrete markets, there are many operational and development synergies we hope to realise in the coming years as public service commissioning becomes more integrated and potentially devolved. The recently announced pooling of budgets in the Greater Manchester area, covering transport, housing, planning, policing and public health is an early example of a context in which we believe our breadth of capability could be highly relevant to more "place-focused" commissioning.

Support Services International

Our principal focus is on the Middle East oil and gas industry where we deliver project management, operational services (such as supplies logistics, rig-moving, fabrication, maintenance and turnaround services), education and training in the United Arab Emirates (UAE), Qatar and Oman. We also provide a broad range of facilities management services in sectors such as hospitality, leisure, education, defence and retail.

In recent years we have developed greater reach and capability across the oil and gas services sector in the region, opening up access to a wider pool of customers and pan-regional, as well as national, opportunities. An example of this is a recent oil and gas services contract with Petrofac in Oman, having initially worked for this client solely in the UAE.

Our focus on servicing essential production facilities (as opposed to supporting exploration), maintaining customers' critical assets and providing their staff with health and safety training led to revenue (including our share of associates) growth of 35 per cent year-on-year to £102.6 million (H1 2014: £76.1 million). Contribution to Total Operating Profit increased by 26 per cent to £4.0 million (H1 2014: £3.2 million). Our future workload is some 83 per cent greater at the half-year than twelve months prior, reflecting a strong operational performance and the successful mobilisation of contracts won in 2014.

Highlights during the period included winning fuel pipeline construction and installation contracts with BP Khazzan, Gulf Petrochemicals Services Company and RasGas, as well as a seawater treatment works contract with Veolia Water.

Our Facilities Management businesses won contracts with new clients including the Abu Dhabi Equestrian Club, the Environment Agency of Abu Dhabi and secured further work with IKEA in Qatar.

Our newly established Facilities Management business in Saudi Arabia mobilised its first contracts in the period to manage services at the Information Technology and Communications Complex (ITCC) and King Abdullah Financial District in Riyadh for the Al Ra'idah Investment Company. We are also encouraged by the prospects for our recently launched joint venture with the Rezayat Group (Interserve Rezayat) which adds significantly to our delivery capability in the Kingdom. 

CONSTRUCTION

We provide advice, design, construction and fit-out services for buildings and infrastructure. Our focus is on forming long-term relationships, developing sector expertise and delivering repeat business predominantly through framework agreements.

*Underlying margins of associates

Construction UK

Market demand continued to strengthen in the period, driving revenue growth of 16 per cent, however, the challenges of the current trading environment, combined with marked supplier cost inflation resulted in margins dipping below our medium term expected range at 1.1 per cent. Although tender pricing is improving and the risks associated with supply chain insolvency and pricing inflation are beginning to recede, we expect margins to remain tight in the short-term.

Notwithstanding the challenges outlined above, we remain confident in our growth strategy, which blends our regional presence in repeat business and frameworks with sector expertise in health, education, water, Energy from Waste (EfW) and selected commercial developments. Work winning in the period was strong, leading to further growth in our future workload to a record £1.7 billion (H1 2014: £1.4 billion). Significant items within the additional workload included our appointment as preferred bidder to build a new £200 million complex at the Defence and National Rehabilitation Centre at Stanford Hall, further wins in the EfW market (in East Lothian and Rotherham) and a contract to build seven secondary schools across Hertfordshire, Luton and Reading.

Construction International

Our performance in the Middle East continued to improve with Contribution to Operating Profit in our associate businesses increasing by 13 per cent to £4.9 million (H1 2014: £4.3m) and margins strengthening to 3.3 per cent (H1 2014: 2.4 per cent). Future workload remained stable at £0.2 billion (H1 2014: £0.2 billion).

Demand continued to strengthen across the region: strategic development plans such as Qatar's 'Vision 2030', the UAE's plans for Expo 2020 and the ongoing need for infrastructure development to keep pace with rapid population growth are all gaining traction and stimulating activity in our market. 

Work-winning during the period included projects to expand the Doha West sewage treatment plant for the Marubeni Corporation, to build a seawater pumping station for a desalination plant in Doha for the Toya Thai Corporation and an executive jet terminal at Al Maktoum International Airport for Dubai Aviation City Corporation. We also secured further works with clients such as Dubai's Road and Transport Authority, Siemens, Petron Gulf and the British School Muscat.

EQUIPMENT SERVICES

Our Equipment Services business (RMD Kwikform) operates globally, designing, hiring and selling formwork and falsework solutions for infrastructure and building projects.

Overall progress was excellent as the business benefitted from our fleet investment in improving global infrastructure markets. Revenue grew by 15 per cent and Contribution to Total Operating Profit increased by 33 per cent to £18.6 million reflecting strong pricing and incremental utilisation growth.

We continued to invest in rising markets, albeit at a more modest pace than in 2014, with net capex of £10.4m (2014: £14.7m). Over the last 18 months we have invested a cumulative £51m in stock, working capital and net capex, however, we expect the rate of expansion in the asset base to continue to ease in the second half of this year.

In Asia-Pacific, we delivered strong performances in Hong Kong and the Philippines, driven by increased investment in infrastructure projects, including the Kowloon Rail Terminus, the Hong Kong Macau Bridge and the Manila Bay Development. Demand in Australasia, however, remains muted following the conclusion in 2014 of a series of major mining-related projects with no current visibility of future capacity expansion.

We continued to see strong growth in the Middle East, benefiting from increased demand in Qatar where a number of large-scale infrastructure projects are now underway, including the East West Highway project where we are supplying equipment on several bridge structures. Demand also continued to grow in the UAE, where work has been delivered on the Dubai Opera house, the Saadyatt Resort in Abu Dhabi and on the new Dubai-Abu Dhabi highway. In Saudi Arabia, we started work on a new 14 storey, 65,000 m2 transport hub being built in Mecca.

The UK continued to benefit from increasingly confident construction markets, with a significant pipeline of road projects offering potential to replace work on more mature schemes such as Crossrail. Work continues on sizeable rail improvement projects in Reading and on the Stockley Viaduct project near Heathrow airport.

GROUP SERVICES

All central costs & income, including those related to our financing, central bidding and asset management activities are disclosed within the Group Services segment. This segment now also includes 'Investments' which was formerly reported separately. Following the disposal of the majority of our PFI portfolio it is no longer judged individually material.

Group Services' costs in H1 2015 were £12.5 million (H1 2014: £9.7 million), reflecting an increased investment in back office capabilities, IT infrastructure, people development and communications. We also started investing in the construction of a new Midlands office where we will consolidate our back-office activities.

NET DEBT AND OPERATING CASHFLOW

Net debt at 30 June was £297.9 million (YE2014: £268.9 million), the movement primarily reflecting our continuing investments in net capital expenditure (HY2015: £28.9 million) and working capital (HY2015: £20.4 million).

The net working capital outflow of £20.4 million (HY2014: £36.5m outflow) reflects a combination of continuing revenue growth, particularly in Middle East Equipment Services, cash outflow in UK Construction and cash inflow in International Support Services.

Capital expenditure continued to be significant at £28.9 million in the period (2014: £24.9 million). This includes continuing investment in the Equipment Services fleet, particularly in the Middle East. This net investment is expected to continue into the second half of the year but at a reduced rate. Also notable is capex of £7.0m as the first stage of investment in a new UK Midlands office.

PENSIONS

During the first half of 2015 we concluded negotiations on the triennial valuation of the Interserve Pension Scheme based on the position as of 31 December 2014. Since the last time this exercise was carried out we have undertaken considerable efforts both to de-risk the liability position, notably via the 2014 pension buy-in, and increase the asset strength of the scheme, including the one-off contribution (in 2013) of £55m of PFI assets. The effect of these actions is reflected in an IAS19 pension asset of £34m in our June 2015 balance sheet (June 2012: £93m deficit) and a much reduced actuarial deficit of £64m as at December 2014 (Dec 2011: £150m deficit).

We have agreed with the Pension Scheme Trustees that the existing deficit recovery payments of £12m per annum, indexed for inflation, will continue until the next triennial valuation.

Key performance indicators (KPIs)

We use a set of financial and non-financial KPIs to measure critical aspects of the Group's performance. These KPIs are aligned with:

• Achieving the Group's strategic objectives of delivering a substantial future workload and generating strong earnings growth and cash conversion.

• The Group's key behavioural goals, specifically regarding our employees and the health and safety of everyone working both directly and indirectly for Interserve.

1. Future workload comprises forward orders and pipeline. Forward orders are those for which we have secured contracts in place and pipeline covers contracts for which we are in bilateral negotiations and on which final terms are being agreed. We include our share of work to be undertaken by our international associates.

2. See note 12 for a definition of operating cash conversion.

3. Staff turnover measures the proportion of managerial, technical and office-based staff leaving voluntarily over the course of the period. This is measured on a 12 month rolling basis.

4. Includes Interserve, its subsidiaries, associates and subcontractors.

5. 2010 base: 377.

OUTLOOK

Looking ahead, our main markets continue to exhibit encouraging demand characteristics driven by demographic change, infrastructure investment and ongoing client need for business process efficiency. Notwithstanding this encouraging backdrop, the impact from April 2016 of the premium to the National Minimum Wage announced in the recent Budget will increase employment costs in UK Support Services relating to more than 10,000 colleagues working in a multitude of contracts with an average duration of four years. Our preliminary estimate of the incremental cost in 2016 is in the region of £10-15 million. We are considering a range of mitigating actions and have begun discussions with our clients accordingly. Until contract pricing can be adjusted for this significant change we will be unable to recover all of this additional cost. We will have better visibility of this over time, as our mitigating actions are implemented.

Against a backdrop of generally improving market conditions in most segments, we reiterate our full-year guidance for further progress in 2015, driven by our focus on markets with strong long-term growth drivers and the successful integration of our recent acquisitions. Whilst risks in the current challenging contracting environment will continue to require careful management, the Board remains confident in the Group's market positioning and the broad range of work-winning opportunities we are able to pursue in seeking to deliver further sustainable growth in the medium term.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact upon the Group's performance, together with the mitigation strategies adopted, have been reviewed and have not changed significantly from those set out on pages 30 and 31 of the Business Review included in the Group's 2014 Annual Report and Financial Statements.

These risks and uncertainties arise from:

• Failure to win new or sufficiently profitable contracts in our chosen markets or to complete those contracts with sufficient profitability, due to adverse changes in the business, economic and political environment.

• The termination or unsatisfactory execution of major contracts.

• A breakdown of the relationships in the businesses in which we do not have overall control.

• Failure to recruit or retain key people.

• Failure to manage health and safety adequately.

• The financial risks discussed in the Financial Review on pages 42 to 47 of the Group's 2014 Annual Report and Financial Statements.

• Damage to reputation resulting from issues arising within contracts, the management of our business or the behaviour of our employees.

• Environmental change which could have uncertain implications for our business and for many of our clients.

The Group continues to have no material exposure to currency risks. Whilst it does not trade in commodities, the Group operates in countries where their economies depend upon commodity extraction and are therefore subject to volatility in commodity prices. The Group's principal businesses operate in countries which we regard as politically stable.

AUDITOR

Grant Thornton UK LLP has been the Group's auditor since 2014. Reappointment will be subject to approval by the shareholders at the next general meeting.

RESPONSIBILITY STATEMENT

A list of current directors and their functions is maintained on the Group website: www.interserve.com.

The directors confirm to the best of their knowledge:

a) the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union;

b) the interim management report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R of the Disclosure and Transparency Rules of the Financial Conduct Authority (DTR); and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R.

By order of the Board

Adrian Ringrose Tim Haywood

Chief Executive Group Finance Director

12 August 2015

Independent review report to the members of Interserve Plc

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of Interserve Plc for the six months ended 30 June 2015 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related notes. We have read the other information contained in the half yearly financial report which comprises only the Chairman's Statement and Business Review and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company's members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company's members those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

GRANT THORNTON UK LLPAuditor

London12 August 2015

Unaudited condensed consolidated income statement

For the six months ended 30 June 2015

Unaudited condensed consolidated statement of comprehensive income

For the six months ended 30 June 2015

Unaudited condensed consolidated balance sheet

At 30 June 2015

Unaudited condensed consolidated statement of changes in equity

For the six months ended 30 June 2015

1The £121.4 million merger reserve represents £16.4 million premium on the shares issued on the acquisition of Robert M. Douglas Holdings Plc in 1991, £32.6 million premium on the shares issued on the acquisition of MacLellan Group Plc in 2006 and £72.4 million premium on the shares placed on the acquisition of Initial Facilities in 2014.

 2The hedging and revaluation reserve includes £16.1 million relating to the revaluation of available for sale financial assets within the joint ventures (£27.6 million at December 2014 and £5.4 million at 30 June 2014).

3The investment in own shares reserve represents the cost of shares in Interserve Plc held by the trustees of the How Group, Bandt and Interserve Employee Benefit Trusts. The market value of these shares at 30 June 2015 was £5.5 million (£4.8 million at 31 December 2014 and £6.0 million at 30 June 2014).

Unaudited condensed consolidated statement of cash flows

For the six months ended 30 June 2015

Notes to the unaudited interim financial statements

For the six months ended 30 June 2015

1. General information

Interserve Plc (the Company) is a company incorporated in the United Kingdom. The half-year results and condensed consolidated financial statements for the six months ended 30 June 2015 (the interim financial statements) comprise the results of the Company and its subsidiaries (together referred to as the Group) and the Group's interest in joint ventures and associates.

The directors have considered the Group's financial position with reference to latest forecasts and the actual performance for the half-year period. Whilst the current economic environment continues to be uncertain, the directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future, noting in particular that: the majority of the Group's revenue is derived from long-term contracts; the Group had visibility of £2.0 billion of work scheduled for 2016 at the balance sheet date; and the Group has access to committed debt facilities of $350 million with a weighted average maturity of 9 years and £300 million until at least 2019. Accordingly, the Group continues to adopt the going concern basis in preparing the interim financial statements.

A copy of the statutory accounts for the year ended 31 December 2014 has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain statements made under sections 498(2) or (3) of the Companies Act 2006.

The interim financial statements for the six months ended 30 June 2015 have been reviewed by Grant Thornton UK LLP but have not been audited (see page 13).

2. Accounting policies and principal risks

The interim financial statements have been prepared in accordance with IAS 34 Interim financial reporting, the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union and the disclosure requirements of the Listing Rules. The financial information set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The interim financial statements do not include all information required for full annual financial statements and should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 December 2014.

The accounting policies and methods of computation followed in the interim financial statements are consistent with those published in the Group's Annual Report and Financial Statements for the year ended 31 December 2014 and which are available on the Group's website at www.interserve.com.

In addition, the accounting policies used are consistent with those that the directors intend to use in the Annual Report and Financial Statements for the year ending 31 December 2015. Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.

At the date of authorisation of these interim financial statements the following standards and interpretations were in issue but not yet effective, and therefore have not been applied in these interim financial statements:

The impact of the sections of IFRS 9 currently issued will result in the Group's project finance interests that are currently treated by the joint venture companies as being available-for-sale, being treated as a debt carried at "fair value through profit or loss" or "amortised cost". As a result, movements in the fair value will no longer be taken to "Other comprehensive income".

IFRS 15 Revenue from contracts with customers

The new standard will replace IAS 18 Revenue and IAS 11 Construction contracts. It will become effective for accounting periods on or after 1 January 2017, at the earliest. In advance of its adoption, the Group will conduct a systematic review of all existing major contracts to ensure that the impact and effect of the new standard is fully understood, and changes to the current accounting procedures are highlighted and acted upon. Any impact is neither known nor possible to estimate at this time.

Except for IFRS 9 and IFRS 15 noted above, the directors do not currently anticipate that the adoption of any other standard and interpretation that has been issued but is not yet effective will have a material impact on the financial statements of the Group in future periods.

In the directors' view, there have been no changes to the principal risks and uncertainties facing the Group from those described on pages 30 and 31 of the Group's Annual Report and Financial Statements for the year ended 31 December 2014. The directors expect that the Group's profits will continue to be weighted to the second half.

3. Business and geographical segments

(a) Business segments

The Group is organised into four operating divisions, as set out below. Information reported to the Executive Board for the purposes of resource allocation and assessment of segment performance is based on the products and services provided.

· Support Services: provision of outsourced support services to public- and private-sector clients, both in the UK and internationally.

· Construction: design, construction and maintenance of buildings and infrastructure, both in the UK and internationally.

· Equipment Services: design, hire and sale of formwork, falsework and associated access equipment.

Costs of central services, including those relating to managing our PFI investments and central bidding activities, are shown in "Group Services".

(b) Geographical segments

The Support Services and Construction divisions are located in the United Kingdom and in the Middle East. Equipment Services has operations in all of the geographic segments listed below.

The table below provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services.

4. Exceptional items

5. Taxation